(Money Magazine) -- Linda Attarian loves to travel. The 54-year-old Tucson resident spends about $6,000 a year jetting off to faraway lands to hike, bike and explore. She's even tried her hand at elephant polo in Thailand.

"My passion is travel, and I would like to continue to do that without giving up my financial security," she says.

For this to happen, though, Attarian needs to make some big decisions now. Recently, Attarian's broker, who had been managing her portfolio since her divorce five years ago, changed firms and recommended that she shift her assets into a new wealth-management account charging 2% in annual expenses.

Concerned by those fees, Attarian decided to transfer her money into low-cost accounts at Vanguard. But since she's unsure how she should invest, her retirement stash is currently sitting in a money-market fund earning 4.5%. The move saved her from recent stock market losses, but Attarian realizes she can't keep her portfolio in cash indefinitely - not if she wants to see the world.

Where she is now

Fortunately, this baby boomer is sitting on a strong financial cushion. She earns $105,000 a year teaching surgical teams how to work devices used in heart and lung operations. Between all of her IRA money and her 401(k), Attarian has $627,000 salted away for retirement. She has another $315,000 in taxable accounts, also at Vanguard. And she will start receiving nearly $3,800 a month from her ex-husband's pension in March 2012.

What she should do

Put her cash to work safely. Prior to moving the bulk of her assets to Vanguard, Attarian held more than 90% of her retirement portfolio in stocks. Yet with plans to work only four more years, she needs to protect some assets, says Tucson financial planner Penny Marchand.

Attarian should therefore put about half of her retirement funds into bonds and cash to help reduce risk, Marchand says. She recommends that Attarian take about $100,000 and split it into four CDs maturing in annual intervals between one and four years.

Next, Attarian should take another $320,000 or so and buy a collection of zero-coupon Treasury bonds ranging in maturity from five to 15 years. As her CDs come due, she can think about rolling the proceeds into new longer-term bonds. This strategy, called laddering, ensures that some of her portfolio will always be seeking maximum yield while another part will be coming due, for liquidity.

Why zero-coupon bonds? Marchand likes them because they can be purchased at a steep discount to their face value, allowing Attarian to build a sizable fixed-income position immediately. Unlike traditional Treasuries, zero coupons don't pay out interest periodically. Instead, the interest compounds over the life of the bond and pays off all at once at maturity.

As for the equity half of Attarian's portfolio, Marchand recommends a diversified mix consisting of around 60% large-cap stock funds, such as Vanguard Windsor II (VWNFX); 30% foreign funds, like Vanguard Total International Stock Index (VGTSX); and 10% small-caps, such as Bridgeway Small Cap Value (BRSVX). All three of these funds are in the Money 70, our recommended list of funds.

Trim her tax bill. Within her taxable account, Attarian owns several actively managed funds that routinely throw off capital gains because they sell stocks frequently. Such funds belong in tax-deferred accounts, Marchand says.

Since Attarian holds them in her brokerage, Marchand says she should dump them and invest the money instead in index mutual funds and ETFs, which are naturally tax-efficient, as they rarely sell stocks.

A good bet: Vanguard Total Stock Market Index (VTSMX), another Money 70 fund. Selling might cost Attarian $1,500 in immediate taxes, but the move could save her more than that in taxes each year going forward, Marchand says.

Save in non-retirement accounts. Though Attarian plans to retire soon, it would be wise to keep her retirement assets sheltered from taxes for as long as possible.

One solution: Rely on her brokerage account to fund the early years of her retirement. To ensure that her account produces enough income, she should start putting at least $500 more each month in her savings. This and her pension will allow her to live off her taxable money until 62, when she will start collecting Social Security. This might take a little sacrifice, but the end result will be her ticket to ride in retirement.